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AQP - Aquarius Platinum Limited - Update on South African Assets
Aquarius Platinum Limited
(Incorporated in Bermuda)
Registration Number: EC26290
Share Code JSE: AQP
ISIN Code: BMG0440M1284
1 June 2011
UPDATE ON SOUTH AFRICAN ASSETS
Aquarius Platinum Limited ("Aquarius" or the "Company") today announces that:
1. Its wholly-owned subsidiary Aquarius Platinum (South Africa) (Proprietary)
Limited ("AQPSA") has completed an initial assessment of the costs and
benefits of the expansion potential at the Everest Mine ("Everest")
resulting from the recently announced acquisition of Booysendal South; and
2. Its wholly-owned subsidiary Ridge Mining (Proprietary) Limited ("Ridge
Mining") has suspended the funding of the jointly-owned Blue Ridge Platinum
Mine ("Blue Ridge") following a review of its economic viability in the
current low platinum group metals ("PGMs") Rand price environment, pending
a decision by the Board of Blue Ridge to place the mine on care and
maintenance; and
3. AQPSA has agreed to purchase a 41.7% interest in Platinum Mile Resources
(Proprietary) Limited ("PlatMile") from a combination of Mvelaphanda
Holdings Limited ("Mvela") and PlatMile management for R 115.5 million
(c.US$17 million), subject to certain conditions precedent, bringing the
Aquarius group`s holding in Platmile to 91.7%.
Everest and Booysendal South
On 4 May 2011, Aquarius announced its acquisition of Booysendal South, a PGM
bearing property that is adjacent to and down-dip of Everest. The Company has
now completed its initial assessment of the likely capital cost of including
Booysendal South in the Everest mine plan, thereby expanding output at and
extending the life of Everest. These preliminary estimates suggest that it will
cost the Company approximately R850 million (c.US$120 million) to extend the
mine life of Everest from the current 6 years to over 30 years, while at the
same time increasing production levels to make use of both current excess and
potential expansion capacity at the Everest processing plant.
This capital will be spent primarily on a second decline shaft system, mining
and underground infrastructure, plant debottlenecking and a new tailings dam to
cater for the extended life of mine. These capital expenditure estimates will be
confirmed in due course by further technical study. The Everest expansion would
be brownfield in nature, with commensurately lower project execution and ramp-up
risk, and will enable Everest to increase its presently planned steady state
production of around 190,000 PGM ounces per annum by approximately 25% to
produce approximately 250,000 PGM ounces per annum from 2017 for the extended
life of the mine.
Blue Ridge
As previously disclosed, Blue Ridge has been closed for redevelopment since
August 2010. During the course of the execution of the redevelopment project,
Ridge Mining determined that the mine could not be operated economically at
current low Rand PGM prices and has therefore recommended that it be placed on
care and maintenance pending a full review of its economic viability. The
Company stated in its Q3 2011 report that such a review was likely to be
prompted by the persistent low Rand price environment.
The Rand basket price for PGMs has since deteriorated further and on-mine cost
inflation in South Africa has continued unabated, with further increases in the
price of electricity, diesel and wages to be absorbed as the mine planned to re-
open. As a result, at current Rand prices the mine would generate insufficient
margins to justify further development expenditures. Ridge Mining accordingly
suspended the funding of the Blue Ridge mine pending a final decision by the
Board of Blue Ridge to place the mine on care and maintenance. It is envisaged
that Blue Ridge management will then conduct a comprehensive evaluation of the
mine to explore alternative mine plans and determine whether the Blue Ridge ore
body can be efficiently exploited in a low Rand price environment.
The mining contractor at Blue Ridge, Murray & Roberts Cementation, has initiated
the processes with the relevant labour unions required by the South African
Labour Relations Act to enable Blue Ridge to make such redundancies as may be
necessary to place the mine on care and maintenance. Blue Ridge has also
initiated discussions around an asset-level debt restructuring with the
Industrial Development Corporation and the Development Bank of Southern Africa,
the mine`s lenders, which are collectively owed approximately R370 million in
interest bearing debt by Blue Ridge which is ring-fenced in the Ridge Mining
group.
Platinum Mile Resources
PlatMile is a tailings retreatment operation located in the vicinity of AQPSA`s
Kroondal Mine that reprocesses tailings materials from the Rustenburg section of
Rustenburg Platinum Mines. Aquarius has held 50% of this operation since 2008,
during which time it has been a consistent source of profitable low cost PGM
ounces, despite lower throughput at PlatMile than anticipated at the time of the
original purchase.
Given the Aquarius group`s shareholding in PlatMile, AQPSA has intimate
knowledge of its operations, value proposition and potential to expand. The
purchase price of R115.5 million was based on PlatMile`s expected future
profitability at current Rand PGM prices before any expansion initiatives, and
is expected to be value accretive for Aquarius while enabling AQPSA to initiate
development of a dedicated tailings division. In this regard AQPSA and PlatMile
are currently assessing a number of growth opportunities. The purchase price is
payable in cash or Aquarius shares at the election of Aquarius. After the
transaction PlatMile management will continue to hold the 8.3% of PlatMile not
owned by Aquarius.
The closing of this transaction is subject to several conditions precedent,
including the approval of the South African Competition Commission and the final
approval of the Boards of both Aquarius and Mvela.
Commenting on these developments, Stuart Murray, CEO of Aquarius, said:
"It is pleasing to note that the significant benefits of the Booysendal South
acquisition are becoming increasingly apparent, with preliminary indications
that Everest can be extended and expanded with industry-leading capital
efficiency. As a result the Board has resolved to accelerate the feasibility
studies and development in respect of the Booysendal project.
The decision by Ridge to suspend the funding of Blue Ridge was not an easy one
to take, but it was based on the firm belief that it is in the interests of all
stakeholders in the mine that it be placed on care and maintenance with
immediate effect. The findings of Blue Ridge management during the redevelopment
project coupled with the current economic realities of the platinum industry in
South Africa strongly suggest that the mine would be loss-making from some time
to come. Under the circumstances, any other course of action would be
financially irresponsible for the wider Group.
On a more positive note, I am also very pleased that we have been able to
consolidate our ownership of Platinum Mile. Although a small transaction, it is
priced attractively and will pave the way to an expanded tailings retreatment
arm for Aquarius which could become an important source of low cost PGM ounces
in an environment of ever-increasing mining costs."
For further information please contact:
In the United Kingdom
Gavin Mackay
+44 7909 547 042
In Australia: In South Africa:
Willi Boehm Stuart Murray
+61 8 9367 5211 +27 (0) 11 656 1140
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 01/06/2011 08:00:01 Supplied by www.sharenet.co.za
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